Oversold AT&T Stock Higher Despite Price-Target Cut

Options traders have been bullish towards T in recent weeks

Managing Editor
May 1, 2018 at 9:30 AM
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Telecom stock AT&T Inc. (NYSE:T) is higher in early trading, despite receiving a price-target cut to $36 from $41 at Deutsche Bank. Of course, this comes just a day after sector peers T-Mobile (TMUS) and Sprint (S) finalized a merger deal. At last check, the equity was trading up 0.6% at $32.88.

Digging deeper, AT&T has long disappointed on the charts, however, trending lower over the past two years. In fact, it was down more than 17% year-to-date coming into today, due in large part to a post-earnings bear gap that sent the shares' to a two-year low of $32.46 on April 26. T stock will now be hoping the low $30 region acts as support as it did back in November, though today's bounce could be attributed to its oversold 14-day Relative Strength Index (RSI) of 28.

Despite its underwhelming price action, options traders have been quite bullish toward the stock. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day call/put volume ratio of 1.89, ranking in the 84th percentile of its annual range. This suggests calls have been purchased over puts at a faster-than-usual clip over the past two weeks.

Echoing that, the stock's Schaeffer's put/call open interest ratio (SOIR) stands at 0.89, and ranks in the 30th percentile of its annual range. This suggests near-term traders have rarely shown a greater preference for T calls over puts in the last year. On a closer look, there's notable call open interest at the 35 strike in the June and July series, while the 37 strike from the same series has been popular among call traders, too.


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